FXStreet (Barcelona) – James Knightley, Senior Economist at ING, notes that stronger employment gains and rising wages coupled with improvements in the housing market and rising equity prices are providing support for consumer confidence and spending, which suggests the FOMC meeting might see the Fed confident for a September rate hike.
Key Quotes
“The preliminary reading of the University of Michigan confidence index for June has risen nicely to 94.6 from 90.7. This is well ahead of the consensus estimate of 91.2 and is stronger than every single reading in 2013 and 2014, although is lower than some of the readings seen at the start of this year, suggesting that the household sector remains in very good shape.”
“The bulk of the gains came from the current conditions component, which rose 6 points, but the expectations component also rose and is at levels consistent with real consumer spending growth of close to 3% YoY.”
“With employment bouncing back after 1Q weakness and average hourly earnings showing signs of finally breaking out of the 1.5- 2.3% YoY range it has been in since 2009 ,we feel that the US labour market now has some real momentum that will give the US consumer greater confidence to spend.”
“With this week’s CPI report set to suggest inflation has bottomed already we are increasingly looking for the Federal Reserve to hike rates in September with this week’s press conference and FOMC statement set to exhibit more signs of a willingness to tighten monetary policy.”
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